With tax time well and truly upon us, many of us will be looking at what deductions we can claim in this year’s tax return. If you’ve donated money through workplace giving or through salary sacrifice arrangements with your employer, you’ll need to be careful as the tax treatment differs based on the method of donation.
Essentially, workplace giving is a streamlined way for employees to regularly donate to charities or deductible gift recipients (DGRs). Usually a fixed portion of the employee’s salary is deducted from the employee’s pay each pay cycle and the employer forwards the donation onto the DGR. However, the amount of employee’s gross salary remains the same and depending on the employer’s payroll systems, the amount of tax paid by the employee each pay period may or may not be reduced to take into account of the donation.
Under the typical salary sacrificing donation arrangement, an employee agrees to have a portion of their salary donated to a DGR in return for the employer providing them with benefits of a similar value. The employee’s gross salary is reduced by the salary sacrificed amount and the amount of tax paid by the employee each pay period will be reduced; the employer makes a donation to the DGR.
If you’ve made a donation under workplace giving, you are able to claim a deduction in your tax return. This is regardless of whether or not your employer reduced the amount of tax paid each pay cycle to account for the amount of the donation. Your employer will provide you with a letter or email stating the total amount donated to DGRs, and the financial year in which the donations were made. Alternatively, your employer will provide the total amount of donations you made for the year in your payment summary under the “Workplace giving” section.
Those that have made a donation to a DGR under a salary sacrifice arrangement, however, are not entitled to claim a deduction in their tax return, since it is the employer that is making the donation to the DGR and not the employee. Therefore, it is prudent to check whether you’ve donated under workplace giving or a salary sacrifice arrangement before claiming any deductions for donations to DGRs this year.
For taxpayers that have made donations outside the workplace, remember for the donation to be deductible, it must be made to DGRs and truly be a gift or donation (ie voluntary transferring money or property without receiving or expecting to receive any material benefit or advantage in return) of $2 or more. Although, if you receive a token item for your donation (ie lapel pins, wristbands or stickers etc), you are still able to claim a deduction.
Receipts must be kept for donations made outside of workplace giving programs, however, if you made donations of $2 or more in “bucket collections” conducted by an approved organisation you may be able to claim tax deductions for gifts up to $10 without a receipt.
